Norwich Union pension customers to get £300 refund

Norwich Union is to pay back a total of £11m to pension customers following a
charging error.

Around 34,000 people who bought stakeholder pensions when they were introduced in April 2001 will receive an average of £300 each back from the insurer.

Stakeholder pensions were introduced as an alternative to expensive personal pensions. Charges for stakeholder pensions were capped at 1pc a year. But Norwich Union, which is part of insurance giant Aviva and one of the UK's biggest stakeholder providers, found it had accidentally been charging people more than this since the products were first taken out.

Letters to customers affected are being sent this week. A Norwich Union spokesman said: "We hold our hands up – we would have preferred not to have made the error, but we did and so we are being open and honest."

The problem was uncovered during a review to ensure the group complied with the Financial Services Authority's Treating Customers Fairly regime. People who have already retired will receive their £300 refund by cheque in the next few weeks. Those who have yet to draw their pension will have it increased to the level it would have been at if the error had not occurred.

This is not the first time that Norwich Union has made errors on charging. In 2005 about 70,000 policyholders shared refunds worth a total of £6m. Nearly one in five of Norwich Union's customers with unit-linked funds were affected by incorrect statements relating to total expense ratios.